Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Q Quarter One 2021 results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Guy McBride, Director of Investor Relations. Please go ahead. Thanks very much, good morning, everyone. Welcome to Ballard's first quarter 2021 financial and operating results conference call. With us today are Randy MacEwen, Ballard's President and CEO, and Paul Dobson, our Chief Financial Officer. We'll be making forward-looking statements that are based on management's current expectations, beliefs, and assumptions concerning future events. Actual results could be materially different. Please refer to our most recent annual information form and other public filings for a complete disclaimer and related information. We are going to be changing the structure and format of our results conference calls beginning with the call today. Randy's formal commentary will be fairly brief, focusing on important developments and indicators of progress in the execution of the company's growth strategy during the quarter. Randy's comments will then be followed by a few very brief notes from Paul rather than a detailed review of the numbers, since those numbers are addressed in our press release and the MD&A. Our aim with this new approach is to leave more time for the growing list of analysts and investors to ask questions and engage in a dialogue with management. With that in mind, I'll turn the call over to Randy. Thanks, Guy, and welcome everyone to today's conference call. In Q1, Ballard revenue was CAD 17.6 million, consistent with our internal projections and reflecting a muted China market currently awaiting further policy pronouncements. Gross margin was 15%, adjusted EBITDA was - CAD 14.0 million, and cash reserves at the end of the quarter were CAD 1.27 billion. Today, I want to share with you how excited we are about the growing market opportunities we have at Ballard. Supported by a strengthening policy backdrop and increased customer engagement, we have a clear line of sight on long-term growth in our core medium and heavy-duty motive applications of bus, truck, rail, and marine. Activity levels are at record highs across the entire Ballard organization. On the commercial front, we're witnessing unprecedented customer engagement across all markets. We've previously commented on the slowed pace of conversion of our sales pipeline to purchase orders, primarily as a result of the pandemic, we remain highly encouraged with our sales pipeline. Our sales pipeline has grown more than 70% over the past five quarters. This reflects the underlying momentum in our business prospects. While the pandemic is still challenging many markets, we see encouraging recovery signs, including strong order conversion over the past month. Given this backdrop, 2021 sets up as an important year, marked by increased and accelerated investment ahead of market tipping points. Bolstered by a fortified balance sheet, we'll deepen our investments in talent, technology, products, advanced manufacturing, localization, and customer experience. We're already making solid progress on key strategic deliverables in 2021, including on technology innovation, product cost reduction, capacity expansion, our Weichai- Ballard JV, and our relationship with Mahle. Let me just briefly review some specific details so far this year. We're proud to announce during the quarter Ballard's industry-leading metric of powering fuel cell electric buses and trucks with over 75 million cumulative kilometers, enough to circle the globe 1,870 times. In the fuel cell electric bus market, we continue to be encouraged with progress in Europe. As previously reported, we received several purchase orders from our European bus OEM partners during the quarter, specifically from Wrightbus and Solaris. Through last year to date in 2021, we've received orders for 135 fuel cell engines for buses in Europe, and we've delivered 69, or about 50% of these engines, through Q1 this year. We're also excited by our work with Global Bus Ventures in New Zealand to put the first fuel cell electric bus in that country through testing and now into revenue service with Auckland Transport. New Zealand passed its Climate Change Response (Zero Carbon) Amendment Act in 2019, setting that country on a path to net zero emissions by 2050, and also making it one of the few countries to have a zero emissions goal enshrined in law. Seeing traction in new geographies such as New Zealand is a very positive indicator. In the truck market, our work is progressing to plan with the Weichai- Ballard joint venture in China, as well as with Mahle on the design of a prototype 240-kW engine for heavy-duty commercial trucks. We continue to expect this product to be ready for testing by the end of the year. Yesterday, we announced an exciting strategic partnership with Linamar for the development and sale of fuel cell powertrains and components for class 1 and 2 vehicles, initially in North America and Europe. In the starting phase of work under the framework agreement, a demonstration platform with a fuel cell powertrain solution will be co-developed, with Ballard providing the fuel cell subsystem and Linamar providing the rolling chassis tanks, enclosures, cradles, and other balance of plant. Following successful testing of the demonstration platform, Ballard and Linamar expect to form a joint venture to sell and support fuel cell powertrains for light duty vehicles, including light trucks and commercial vans. We're thrilled to partner with Linamar, a leading global manufacturer of precision products and powertrain solutions that's leaning into the future of zero emission mobility. This collaboration is a natural extension for our existing joint working relationship on the recently announced UPS delivery vans trial in California. We're deepening our relationship based on a joint vision to provide zero emission fuel cell powertrains for light duty vehicles, particularly those where fleets require extended duty cycles and rapid refueling to maximize utilization. I noted the increased momentum in the rail market on our last conference call, including our ongoing important work with Siemens to power its Mireo commuter train, continued commercial operation on the world's first fuel cell tramline operating in Foshan, China since late 2019, receipt of a purchase order from Arcola Energy in Scotland, an announcement of our collaboration with Canadian Pacific to power the first fuel cell freight train in North America. In addition, subsequent to Q1, we also announced that Ballard will be powering a switching locomotive for Sierra Northern Railway in Northern California. Another proof point in this rapidly evolving rail market. In the marine market during Q1, we announced a non-binding MOU with Global Energy Ventures in Australia for development of a new fuel cell powered ship called C-H2 Ship, designed to transport 2,000 tons of compressed green hydrogen. This is a fascinating opportunity with a small scale demonstration of the C-H2 Ship expected to require 10 megawatts of fuel cells, and the full scale ship requiring propulsion power of approximately 26 megawatts. In Q1, we also signed a non-binding MOU with Chart Industries to develop a liquid hydrogen storage and vaporization solution for heavy duty vehicles. Given the high energy density of liquid hydrogen, this will be a potentially strong solution to address the greatest range requirements for heavy duty vehicles, including coaches, long haul trucks, rail, and marine applications. In other commercial progress during the past several weeks, we announced Ballard's membership in the Hydra Consortium, focused on enabling heavy duty mining mobile equipment to run on renewable hydrogen. Other key partnerships in the consortium including Mining3 and ENGIE. As we've noted before, off-road opportunities, including in mining and construction, represent very exciting upside potential for fuel cells moving forward. On the technology and product development front, we continue to make measured progress on our key development programs, including ongoing work with our Weichai- Ballard joint venture in China. We're also tracking ahead of our plan on our 3x3 fuel cell stack cost reduction program, enhanced by breakthrough designs and performance from our new MEAs and bipolar plates, continued progress with our supply chain, and implementation of advanced manufacturing initiatives. We're proud to have recently published Ballard's second annual ESG report, demonstrating our strong commitment to transparency, reduced emissions, investment in our employee value proposition, including diversity and inclusion, and strong governance. As a purpose driven company with a vision to deliver fuel cell power for sustainable planet, we're making clear progress on our own ESG journey. We continue to work toward our Mission Carbon Zero 2030 initiative with a goal of achieving carbon neutrality at Ballard by 2030. As noted in our recent ESG report, beyond the progress we made in reducing our own operational carbon footprint, we completed cradle-to-gate GHG assessments of our key fuel cell products. Ballard is poised with highly disruptive leading fuel cell technology for large, attractive addressable markets. We believe we're set up for a strong long-term growth as a result of the accelerated investment we're making this year. We also continue to assess strategic acquisition opportunities, including opportunities that will reduce customer friction points and simplify customer experience. Before finishing, I'd like to formally introduce Paul Dobson, Ballard's new CFO. Paul joined us in late March and has been actively working to fully familiarize himself with the hydrogen and fuel cell industry and with Ballard. Paul's skills and experience will serve Ballard well as we seek to scale our business over the coming decade. With that, I'll turn the call over to Paul. Thanks, Randy, and good morning, everyone. It's my pleasure to be with you here this morning. I'm the newest member of the Ballard leadership team, having joined the company just five weeks ago. I can tell you it's been a busy but incredibly exhilarating and educational experience so far. A bit about my background. I grew up in Ontario, Canada, and went to the University of Waterloo and Western University. After graduating from Western, I worked at CIBC for 10 years in different finance and business development leadership roles in Canada and the U.S. I'm drawn to new entrepreneurial growth situations. Most of my time at CIBC was spent growing CIBC's fledgling electronic banking business in Canada and the U.S., which was quite new and growing fast at the time. I transitioned to Direct Energy, which sells natural gas, electricity, and services to homes and businesses throughout Canada and the U.S. That was in the early 2000s when many downstream energy markets were starting to deregulate. There was a tremendous new market growth opportunity. I was with Direct Energy for 15 years, including as Chief Operating Officer and then Chief Financial Officer based in Houston. While I was there, I helped grow the company both organically and through M&A from about CAD 1 billion in revenue to over CAD 20 billion, becoming one of the largest energy retailers in North America I left Direct Energy in 2018 and joined Hydro One, a large utility in Ontario, initially as CFO, but also subsequently serving as the interim CEO. In the CEO role, I spent a great deal of my time with the capital markets, institutional investors, rating agencies, as well as regulators, governments, policy makers, and of course, the great team at Hydro One. As I said earlier, I'm drawn to entrepreneurial growth businesses, but I also want to work with great teams, people with similar values and leadership styles where we make the business successful as a team. When the opportunity at Ballard came along, it was exactly what I was looking for. I believe that hydrogen is a viable solution to fight climate change, and the hydrogen market is poised to take off and become a multi-billion dollar global industry. Of course, the people at Ballard are pioneers and well-respected thought, technology, and market leaders in the hydrogen space. I can share with you from what I've experienced over the past five weeks, from formative conversations with blue chip customers and partners, as well as many inbound calls from industry and the capital markets, there is tremendous global support for the hydrogen industry, which I believe reinforces our multi-billion CAD growth forecast for Ballard. Ballard's strategy to focus on the heavy-duty mobility market is strongly supported, not only by independent research, but by customer and market feedback. In my opinion, it's not a matter of if, it's only a matter of when. My focus here will be on two things, helping Ballard grow revenues and, as importantly, scaling the business globally to meet the worldwide demand while maintaining our leadership position and reputation for safety, innovation, quality, and service. I'm committed to making sure Ballard carves out a prominent place in the market and creates sustainable long-term value for shareholders. Finally, as many as you know, Tony will be retiring at the end of May. I'm very fortunate that Tony is leaving the whole finance and admin function in such good shape. From what I've seen and heard, including from our external auditors, the team here is first class, and the business is well controlled, exactly what we need to scale up and grow. Of course, having CAD 1.2 billion on the balance sheet is a strong, fortified position to work from. Thank you, Tony, for leaving the business in a great position, which makes my job so much easier. With that, let me turn the call back over to the operator for questions. Thank you. We will now begin the question and answer session. To join the question queue you may press star one on your telephone keypad. You will hear a tone acknowledging your requests. If you're using a speaker phone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Praneeth Satish from Wells Fargo. Please go ahead. Thanks. Good morning. I guess just to start, revenue in the first quarter was down year-over-year, I understand there's a huge sales pipeline here, but I'm just trying to understand for the quarter itself, how much of it was, do you think, due to some softness in China while you await policy clarification or just lingering kind of COVID slowdown? Was there some other driver here? Yeah. Praneeth, thanks for the question. I think it's a combination of a couple of factors. One is that we did, of course, see really over the last five quarters or so, four quarters, we've seen this slowdown in China awaiting policy pronouncements, and we're expecting to see some developments on that front in the coming months. That's part of it. Of course, last year, if you look at Q1, there was no impact from COVID-19. Obviously, in Q1, we saw that occurring later in the year, Q2 through Q4. Last year in Q1, we did have a fairly large shipment to our Weichai- Ballard joint venture of kits. I think it was probably an atypically strong Q1. If you look at our business historically, almost every year, the first half is a slower pace, typically around 35%-40% of our business, and typically about 60% or so in the second half of the year. Clearly it's softer than the Street would have liked, but it was actually consistent with our own internal expectations for our plan for 2021. Okay. Got it. Second question here, you're making good progress with decarbonization on rail with Canadian Pacific and Sierra Northern. Do you see opportunities to start to maybe announce some more JVs for rail in Europe? How would you compare the two markets, U.S. and Europe, in terms of rail and opportunity to decarbonize? Really glad you asked the question about rail. This is a market that has really surprised us to the upside here in the last six months. Some very good progress. Let me just provide some context before I get into the details. If you look at the Hydrogen Council estimates, there's an expectation that in 2030, 10% of all new trains in key markets will be fuel cells. I want to just share a little bit of what we've done historically. We started about four years ago in China with CRRC, which is the largest manufacturer of rolling stock in the world. We now have, from December 2019, as you move forward, the world's first fuel cell tramline in operation. Five trains operating on the Gaoming line in the city of Foshan in Guangdong Province. I had an opportunity to ride that tram earlier this year. It's quite an experience. That's a very good data point. A lot of learning that came for Ballard in terms of rail codes and standards, shock and vibration, noise, packaging, et cetera. We've taken a lot of that learning, of course, and applied it to our work that we're doing with Siemens for the Mireo train in the European market, and we expect that Mireo train to be formally launched this year. It's a very intriguing platform because it's kind of the first purpose fuel cell design platform. I think it's going to be the most compelling solution in Europe for fuel cell train. It's interesting, if you look at the China experience and the experience with Siemens now in Europe, a lot of learning there. It was really about markets where you're moving people. What we see in North America is something quite different. What we're seeing here now are markets to move freight, so delivery of goods. It's interesting, if you look at the profile of freight delivery on railways, you're typically talking about very long, very heavy trains along long routes with lots of cargo. These are fixed routes that have strategically located fueling stations currently. I think if you look at the zero emission options available, less than 1% of the rail lines in North America today are electrified. What you're looking at is either two options. One is where you look at electrifying rail lines with overhead catenary wires at very high cost, or alternatively, as the only zero emission option, I think that's economically viable, you can look at the incremental costs of hydrogen locomotives. I think as you look at that dynamic, if you think about back in the rail industry in the 1950s, the dominant theme there was the transition from steam engines to diesel. I think in the 2020s and 2030s, the dominant storyline in the North American rail market will be the transition from diesel locomotives to hydrogen fuel cell locomotives. The signature project we have here at this time is with CP. CP has 1,200 locomotives in North America. Those locomotives come up for refurbishment or recall basically every 15 years, so they're modernized every 15 years. What we see with CP's 1,300 locomotives, is an opportunity to go through this pilot program, which will get implemented by the end of 2022, an opportunity to validate the value proposition of zero emission locomotives with hydrogen fuel cells, and then to start to see them replacing their existing diesel line haul locomotives over time as these locomotives come up for refurbishment and modernization. That's just CP with 1,300. There are 40,000 of these locomotives in North America. We've recently announced as well a project with Sierra Northern Railway for a switcher locomotive in California. This is a market we are very excited about and a market that I think as you look out to 2030 to 2040, in that time range, we will see very high penetration in some of the commuter rail markets as well as the delivery of freight. Great. Thank you. The next question comes from Aaron MacNeil with TD Cowen. Please go ahead. Hey, morning all. Thanks for taking my questions. In the quarter, there's a nice uptick in press releases, order flow, and other announcements. I was surprised to see only CAD 11.8 million in new orders hit the backlog. I think you did a good job of addressing it in your prepared remarks, it got me thinking about materiality. It's not lost on me that a lot of the announcements in the quarter, like your alliance with Linamar, hold longer term strategic value, maybe you could walk us through a couple examples of press releases from the first quarter and, from a mechanical perspective, what the near term order profile might look like from a CAD perspective, what the longer term strategic value to Ballard might be. For the longer term stuff, maybe you could also characterize the materiality and timing of what future orders might look like. Ultimately, what I'm trying to get a sense of is, when I see a Ballard press release going forward, maybe give me the tools to look at how to interpret the press release from a materiality perspective. Yeah, Aaron, thanks for that comment. I think a fair comment. In some cases, some of the details aren't known yet, in terms of how it will roll out in terms of volumes and market adoption. I think we still need to take a step back and acknowledge and understand that these markets of bus, truck, rail, and marine are still going through transition. Very early stage of market adoption. Today, we have about 3,400 buses and commercial trucks in the field. As I mentioned earlier, with over 75 million kilometers, that is about 3,300 more than we had, say, four years ago, but it is still the first second of a 24-hour day in terms of market adoption. I do think that what we are seeing is a number of pilot projects, which is different than demonstration projects in my opinion. We are not talking about validating technology anymore. We're talking about validating economic value propositions and making sure that packaging is correct for these different opportunities. As an example, the relationship with Mahle is really about packaging a 240-kW engine with a lot of input from Mahle on things like cooling, on things like optimization of DC-DC converters, looking at the entire powertrain solution. That's going to take some time before it hits volume. I think we'll be looking to see that 240-kW engine demonstrated later this year with Mahle. As we look at some of the programs with CP, as I mentioned, your question was about some of the announcements in the quarter, of course. When you think about CP, again, this is a demonstration pilot project that will be 2022 when you'll see us getting some feedback from the customer on that demonstration. We are talking about programs that will take some time here, and I think we've been communicating this really for a number of years. If you look at the regulatory environment and the policy framework, and when things like zero-emission vehicles in different markets, including California and Europe and China, take effect, including in different markets, bus, truck, rail, and marine, we do see 2023 and 2024 as those first years for significant market adoption and then a very steep growth curve occurring through to 2030. I think your comment's a fair one, Aaron, and as we look at future announcements, we'll try and offer some additional tools where people can understand what does that mean for market adoption and timing. In some cases, some of our counterparties understandably are a little reluctant to get ahead of their skis and set market expectations too far. I think that's just the reality of where we are in the marketplace today. In terms of order book, yes, there's been slow conversion of the sales pipeline to the order book over the last year. We saw a very significant step change in the last 30 days on that front, we're pretty excited about that. We do expect to see a very high level of conversion throughout 2021 and early 2022. Maybe, I didn't want to ask on specific companies, because the details you may not want to get into, but take CP since you brought it up. Is there a backlog impact based on that announcement for that one demonstration unit? I was just, from a purely mechanical perspective, if I compare Wrightbus, the 50 order announcement, what does that mean for the backlog? Then what about the CP announcement? Yeah As an example, what does that mean for the backlog? Yeah. CP was basically 1.2 MW of fuel cell engines that we got the first order for, right? Yes, that goes into backlog when we get that. That goes into order book. It's really not reflective of what we're talking about in terms of the long-term opportunity. Of course. No, understood. Yep Final question from me. You mentioned in the press release and your prepared remarks that you're tracking ahead of a 3x3 cost reduction program. You mentioned in the prepared remarks, breakthroughs in design, supply chain improvements, et cetera. How are you measuring your progress internally? Can you give us a specific example or two of how the timeline's shifted since you last described the program in detail at the analyst day? Sure. Great question, Aaron. If you look at our goal, we have a corporate goal for 2021 to achieve X% cost reduction for our fuel cell stack in our 3x3 program. We have already, in Q1, exceeded our full-year goal for that cost reduction program. A lot of extraordinary work that's happened late last year, and early in Q1 that's helped achieve that already. When I say we're tracking ahead of program, I think we're going to see something like X. I don't want to provide visibility on that because it impacts potentially selling price dynamics as well, but the 70% 3x3 program, we're certainly well ahead of that, and we'll see almost the lion's share of that achieved in 2021. Wow. Okay, great. That's all for me. I'll turn it over. Thanks. Yep, thank you. The next question comes from Greg Wasikowski with Webber Research. Please go ahead. Hey, good morning, guys. Thanks for taking our questions. I just wanted to kind of piggyback off the last one and just talk more about the pipeline and conversion to backlog and order book. If we just look at kind of the top of the pipeline and conversions over the next couple of months, we kind of expect that to be, not asking for amounts, but maybe% of how much could potentially hit the 2021 numbers versus looking at 2022 and beyond. Could it be like a 50%/50%, or is it more like a 90%/10% 2022 and beyond? Yeah, I think we'll have some limited impact to 2021 in terms of conversion of the sales pipeline to order book. If you look at the conversion time and then you look at delivery time, it does take a number of quarters, typically. It's driven in large part by supply chain as well as in large part by the timing from order and when the customer actually needs the product. A lot of these projects, including, for example, bus programs, they don't submit an order and then ask for the product delivered three or four weeks from now, right? They're typically looking at a number of quarters out. I would say your 90%/10% is probably a better guide rather than the 50%/50%. Okay, got it. For the next one, on the Weichai JV, on the last call you said that JV could potentially reach break even by the second half this year, potentially beginning of 2022. Is that still the goal or have the policy delays in China pushing that timeline further into 2022? Yeah, I think that's a fair comment. The policy delays have frankly been unexpected, on the policy front, we actually had a pretty important, I would say, start to the year in China on the policy front, right? You've had the 14th Five-Year Plan was approved in March, and in that plan, the environment has a very significant focus, and the shift really is going from clean up to decarbonization. They call it green ecology. Now we've got these important milestones or goals for carbon peak 2030 and carbon neutrality 2060. Then since that time, you've had two important announcements. I'm not sure if you're fully aware of these. One of them is the Ministry of Science and Technology announced a hydrogen society program in Shandong province. We think this will be a major boom for Shandong province fuel cell opportunities and which will, of course, help the Weichai- Ballard joint venture, which is located in Shandong. Also, the National Fuel Cell Technology Innovation Center was awarded to Weichai on April 18th. This is another important development in that market. On the deployments front in China, you're also seeing about 3,400 buses and trucks from Ballard in that market right now with over 70 million kilometers. That's a more recent number than the number we provided on our overall global install base of 75. I just want to highlight, just on the joint venture, I'd say there are three key things that have been going on there. One is really kind of optimizing and improving yield improvements, as we're waiting for the market to get uncoiled there. The second is module development activity, making sure we have the portfolio of modules to satisfy the different market requirements for bus and commercial truck, including different market segments. A lot of work being done on balance of plant components by the Weichai- Ballard joint venture, including significant work on cost reduction. The last one is just the market and customer engagement side. Notwithstanding a stalled market kind of awaiting the announcement of the Hydrogen Cluster Program, we are seeing significant customer activity and engagement from the vehicle OEMs, getting new platforms certified, testing, and engagement with end users. There's a lot of work going on in the background that I think is going to be very helpful as the policy kind of gets announced and clarified here over the coming months. I think your assessment of a move out with the delayed policy landscape is a fair one. Okay. Thanks, Randy. Thanks, Greg. The next question comes from Rupert Merer with National Bank. Please go ahead. Rupert Merer with National Bank, your line is live. Sorry about that. Good morning, everyone. Morning, Rupert. Randy, you mentioned potential for clarification in the coming months on the hydrogen subsidy in China. Do you have specific visibility on when you could get more detail on the program? To your knowledge, have any of the demonstration regions in China been announced yet or indicated for the cluster program? Yeah, Rupert, great question. What's happened is there's been another iteration of the process, if you will, where it looks like there are five clusters that will be awarded. The Shanghai cluster, the Beijing cluster, the Guangdong cluster, the Hebei cluster, and the Henan cluster. Those five clusters were required to resubmit some paperwork as of April 30th. That's just occurred. I think there's additional progress that will be made over the next 60, 90 days with the national government and each of these five clusters working through it. This hasn't been announced publicly yet, but that's our understanding of what's going on in the China market for those clusters. In which regions in China can you participate? You mentioned, of course, that Weichai is based in Shandong, are you able to participate meaningfully in these other areas? Yeah, we feel like we have good opportunities, particularly in the Shanghai, Guangdong, and Henan clusters. Great. Just finally on this, is there any more color on how the subsidies could be delivered? Will they be primarily to the vehicle and infrastructure companies, or could some of that capital actually go directly to the manufacturers as well? Yeah. It's a points-based formula with funding going to different parts of the value chain. I do see that the vehicle manufacturers will likely be participating in that subsidy scheme, not just end users. Great. Thanks very much. Thank you. The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead. Good morning. Just wanted to follow up a little bit more on the sales pipeline. Could you kind of characterize the markets, maybe just the ones that you see first in terms of the pipeline strengthening and how you see that playing out over the next couple of years? Good morning, Rob. Thanks for the question. I think, what we're seeing in the last quarter, pretty consistent with the previous quarter as well, is the sales pipeline is actually tracking fairly well to what our goals were as a company for market diversification. Typically we're looking at China, roughly 40%, EU roughly 40%, and then rest of world, primarily California, North America, 20%. If you look at the market applications, I think we're seeing new markets coming into the sales pipeline. Bus is clearly the dominant share at this time as the more mature market. Truck activity is increasing. Rail, of course, and marine, we believe those two markets will surprise to the upside over the next number of years. We're also seeing some additional off-road markets starting to play a, I'd say, a more substantive contributor to the sales pipeline, which is very encouraging. Things like mining, construction market opportunities, and we're seeing some new geographies outside of China, Europe, and North America starting to play a key component in the sales pipeline as well. Okay. Thank you. Then on the Linamar announcement, just wanted to clarify how you see that playing out in terms of, I think you mentioned a JV for a platform for fuel cells. Could you just maybe give us a little color on how that kind of develops in your vision at this point? The key here is really that, and of course, everyone will understand, Linamar is a very significant tier 1 supplier to the automotive space, strong relationships for these classes of vehicles, as we're looking at light duty vehicles in our collaboration with Linamar. They're a high precision manufacturer, high volume manufacturer, bring a lot of capability and supply chain muscle to the table. This is a compelling opportunity for us. As we look at that market opportunity, what we've seen is that, many of the platforms where you'd want to have a fuel cell vehicle in light duty, for example, cargo vans, there just haven't been OEMs stepping into that market quite yet. The vision here is to get ahead of that and to offer a fuel cell powertrain system that can be marketed in a series production eventually, to the vehicle OEMs in a plug-and-play type format. I think as we look at this market opportunity, we're seeing two phases of activity with Linamar. The first is developing this platform together, and Ballard will primarily be responsible for the development of the fuel cell system. Linamar has a scope moving from the fuel cell system to the powertrain, including storage tanks, and DC/DC converter, and some other key components. If you look at what Linamar's contemplating here, it's initially validating that system, going through testing, engagement with customers, and then ultimately Ballard and Linamar moving to a joint venture, where we design and manufacture our respective components and use the joint venture as a sales vehicle to the channel that Linamar already has strong engagement with. This is the two phases of activity. It's obviously early in the relationship, and this is a follow-on from the work we're doing with Linamar for UPS delivery vans in California, where we've already established a very strong working relationship. Lots more to be worked on in the coming months and coming years. We're very excited about the opportunity for what I think is one of the leading players that's leaning forward on the future of mobility. Great. Thanks for the color. I will turn it over. Thanks, Rob. The next question comes from P.J. Juvekar with Citi. Please go ahead. Hi. Good morning, Randy. It's Eric Petrie for P.J. Juvekar. There's been some mention of hydrogen in the Biden infrastructure bill, but really the focus seems on EVs for mobility. Is that a small step back for the hydrogen economy? Yeah. Great question, Eric. I think what we've seen is that there are two key themes at the moment that we think really help the hydrogen fuel cell opportunity in the U.S. market. One is decarbonization and U.S. getting back into the Paris Agreement, obviously, and looking at net carbon zero by 2050. That's a major initiative. The only way to achieve that is to include hydrogen. In my opinion, you cannot achieve the Paris Agreement objectives, but for the inclusion of hydrogen as a key part of your decarbonization strategy. The second, as you point out, is infrastructure. What we see is this convergence of decarbonization and infrastructure leading to an environment where we'll see battery electric vehicles working in the use cases and opportunities where they have a compelling response. Likewise, fuel cell electric vehicles seeing success in the markets where fuel cell electric vehicles have a strong value proposition. I just highlight again, if you look at the California market as an illustrative example, I think of what you'll see eventually across the U.S., is in California for buses, all new transit buses, let me say this again, all new transit buses must be zero emission by 2029, and 50% of them must be zero emission, not low emission, by 2025. There's a very clear pathway in that important policy making state on zero-emission vehicles in buses. Similarly, on the truck side, we've got the Clean Truck Standards that was passed last year, and that Clean Truck Standard is effectively by 2024, a certain portion of all trucks of all classes must be zero emission starting in 2024 and scaling up to very high penetration by 2035 and 100% by 2045. What we see are the policy shapings in California on zero-emission buses and trucks will be key drivers, we believe, not just in California, but as other markets look to adopt similar type of decarbonization of mobility policy, where fuel cells will play, I think, the dominant share role, particularly in these heavy trucks. Great. Thank you. When you take a look at some of these deals and announcements with Linamar, Hydra Consortium, Chart Industries, how do you see the timeline or which is most advanced in terms of translation into orders as well as earnings? Yeah, pretty clear on that front. Anything to do with bus is earlier, will translate to larger orders initially. Truck will come second. We call this our stacked or revenue scaling effect, where the bus market starts to grow significantly. On top of that, the truck market starts to see penetration and then grows significantly. As those two markets grow, the rail market will add, as those three markets grow, the marine market will add on top of that. We see those four markets aggregating to about CAD 130 billion revenue opportunity by 2030. I do believe adoption will be in that sequence, bus, truck, rail, and marine. Thank you. Thanks, Eric. The next question comes from Michael Glen with Raymond James. Please go ahead. Good morning. Thanks for taking the question. Randy, can you talk about the evolving competitive dynamic in the industry? Clearly, we're seeing quite a few announcements take place from peers in the fuel cell space. Are you seeing any changes take place in terms of your positioning versus others in the market, and how do you see that evolving? Michael, thanks for the question. I think it has been an evolving competitive dynamics, and I think it's going to continue to evolve over the next number of years as well. I think the next 24 months, there is a race to provide leading technology that has the performance, durability, reliability, safety, efficiency, et cetera, that meets the market requirements. In my opinion, cost reduction will be a key part of that as well. As I look at the dynamics, what's really happened over the last few years is we now are seeing mobility heavyweights moving into the space. Recently, for example, you saw Bosch announce a billion-dollar investment in the fuel cell space over the coming decade. Of course, that's exactly what we're doing at Ballard, right? We have over CAD 1 billion of cash. We plan to invest in talent and technology and products. It is going to be a competitive space. I think what I've seen is that over the last three months, compared to the last time we talked, our competitive position has only strengthened. I say that because this 75 million km, and the validation of our technology working in the field is critically important. A lot of the customers really want to make sure that as they deploy, safety, quality, reliability are critically important. Their badge is on the front of these trucks or buses, rail, and marine. It's critically important for them to make sure they have a partner that is, relatively speaking, low risk. As you look at the positioning we have, and there is a war on talent in the fuel cell industry right now, we have it here at Ballard. We're in very good position from a talent perspective. We're on the 13th generation of fuel cell stack and eighth generation of fuel cell engine, and we're working on the next generations, of course. We're continuing to innovate on that front. I don't think anyone's even close to those levels of generation of product. Of course, this is for the heavy-duty motive market, not the passenger car market, where Hyundai and Toyota, I think, have advantages there. I think if you look at some of the collaborations that we've announced here, it's just another, whether it's CP Rail in the rail market or Sierra Northern Railway, whether it's continued work with Wrightbus and Solaris in Europe as illustrative examples. As you look at some of the marine opportunities we're seeing, we're making progress in each of those four verticals of bus, truck, rail, and marine with named companies that are in this for the long term. These are all projects designed to move to scaling in the long term. I do think the market's going to continue to be competitive. I think technology, product, cost, performance are all going to be critical, and that's what we're focused on here. Thanks. Just on commercial trucks, you talked about being ready for testing by the end of this year. Does this mean you will have a pilot out there in, say, early 2022? What would be realistic to think about from an actual commercial product perspective? When would an OEM be able to actually buy your solution? Yeah, Michael, we're not quite there yet in terms of identifying when a pilot will be on road and when will be available for selling. We do think that 2023 is a timeframe when we expect to see earnest market adoption of this product. Could be 2024. That's the timeline we're looking at. In terms of piloting and pre-series production, et cetera, there's a lot of work that will happen in 2021 and 2022 on that front. This will have to provide more visibility as we meet some of those milestones. We don't want to get ahead of our skis on announcing things early. Okay. Thanks for taking the questions. Sure. Thanks. The next question comes from Christopher Souther with B. Riley. Please go ahead. Hey, guys. Thanks for taking my question here. I just wanted to touch on the Weichai visibility again here. I think the long-term opportunity there is pretty apparent, but with the low activity we saw in the first quarter, I just wanted to get a sense of, until we get maybe some of these cluster announcements over the next 60, 90 days, do you expect this kind of low activity we saw in the first quarter to be pretty consistent until some kind of policy announcement comes? Understand there have been a couple incrementally positive things around the Five-Year Plan and in Shandong Province, but is the cluster kind of the key thing you think OEMs are waiting for? If we do get an announcement in 90 days on that, does that kind of translate into fourth quarter revenue or early next year starting to kind of ramp up? I just wanted to get a better idea of the visibility you guys are starting to hopefully see there. Yeah, I think I would just characterize the market as, in some ways, frozen over the last number of quarters as we've been waiting for these policy clarifications. I think you're right, that will continue until those announcements occur. If it takes longer than 60, 90 days, it takes longer. I think what we'll likely see is that the impact will be disproportionately weighted for 2022. Okay. Got it. The European bus opportunities appear to be accelerating based on some of the order flow. Can you give a sense of what the mix in the backlog is with those three key customers there? I think there's about 60, 70 modules that we currently have in the order book backlog for delivery. Most of them hopefully for this year. In some cases, that would be dependent on the end users and when they want to take delivery of these buses. We have seen delays over the last number of quarters on this market segment in terms of customers taking product with COVID-19 challenges at their locations. Hopefully, that doesn't impact later this year. We'll see. More importantly, though, I think, is that what we're seeing behind that order book, the sales pipeline for buses is very encouraging. I think the European bus market is going to show very strong growth for fuel cells and for Ballard. I think we'll see a lot of, perhaps more important than orders converting to revenue in 2021, we're going to see sales pipeline converting to orders. I think that to me is the more interesting dynamic. Just on the reduced scope with Audi, is this kind of current run rate you saw in this quarter a good baseline we should use throughout the year for technology solutions? Or are any of the recent announcements with Linamar, Chart, multiple rail customers likely to have TS opportunities, you think? What we're seeing is we're actually investing more on our own corporate balance sheet on some of these strategic programs to make sure we have full IP rights and able to prioritize the investment spend. I do think what you've seen in terms of Q1 cadences be fairly consistent through the rest of the year on that Audi program. Okay. Any other kind of programs, though, that we should flag that might be on the cusp? Or is the overall revenue rate probably pretty consistent? Yeah, I would use Q1 revenue rate and look at that over the course of the rest of the year. That being said, there are a number of exciting opportunities in the sales pipeline that could have some fairly significant implications going forward. Okay. That's helpful. I'll hop in the queue. Thanks, guys. Yep. Thank you so much. The next question comes from Pearce Hammond with Simmons Energy. Please go ahead. Good morning. Thanks for taking my questions and the helpful color on the call here. My first question pertains to the cost reductions that you highlighted earlier on the 3x3 plan. Congrats there. Just curious, when do you expect that to start to flow through gross margin and seeing some improvement there? Yeah, great question. The 3x3 plan still has more work to do in terms of translating some of the development changes into manufacturing and with new product, you obviously have to sequence customers onto that new product. There's some work to do. I would look at 2022 as a timeline when we'll start to see some of that gross margin pick up. Okay, great. My follow-up, you've talked about, and you highlighted in the release, the potential for acquisitions as you look at the ecosystem to where you could help reduce customer friction points. How are the opportunities looking now? Are there a good number, or are they priced at a more rich level? Given that equities have been coming down here recently in the sector, is it getting more interesting? Just like a quick update on what you're seeing on the acquisition front to strengthen the company. Yeah. Hi, Pearce, it's Paul here. Since I've been here for the past five weeks, there's been a tremendous amount of activity and looking at different opportunities, corporate development. There's different products, different markets, and looking both downstream and upstream across the whole ecosystem, to help expand our capability. There's different files that we're actively working on. Not sure when we'll actually see one come through. Could be this year, could be 2022. We've also hired a new VP of business development who's got a very strong background in M&A, who is also helping us out and coming up to speed on all the different files. We're putting a lot more emphasis on this area, and like I said, expect to see something probably either later this year or into 2022. Okay. Thank you very much, Paul. Thanks, Pearce. The next question comes from Jonathan Lamers with BMO Capital Markets. Please go ahead. Thanks for taking my question. On the Linamar demonstration partnership, what products would the joint venture potentially produce? Is it the interchangeable chassis with the fuel cell system, including stacks supplied by Ballard? Yeah. Hi, Jonathan. Thanks for the question. What we're expecting is that most of the product that will be produced will be the respective scope of work done individually at Ballard and Linamar for our respective supply scope. We would see the integration of that product likely at the JV, and I think the interchangeable chassis that you're referring to is the likely point. I think there's still a lot of work to do to understand the most effective way to structure this from an efficiency perspective. What we're trying to do, of course, is avoid unnecessary CapEx spending on facilities, et cetera, and trying to utilize existing capacity that we have both at Linamar and at Ballard. Great, and to Eric's earlier question about quantification, I realize the sensitivities around this question, but are you able to provide us with any sense of how large the market for commercial pickups and vans powered by fuel cells could be? I'm kind of imagining that there could be a chassis plant with volumes in the thousands, and this could result in revenue in the tens of millions potentially for Ballard a decade out. Yeah, I would think that there's a multiple of that. I think, Jonathan, that number is quite light. If you look at this opportunity on light duty vehicles, we'll initially focus on cargo vans and applications where we see taxi fleets and other opportunities. We are looking at fleets where you have high utilization. This opportunity, though, will enable us to have an offering for the passenger car market long term as well. Obviously a very large addressable market and one that Linamar is very well positioned in. Thank you. Just to circle up on China, what would be the earliest the joint venture could need more MEAs and kits at this point? Is it fair to say that that's a 2022 dynamic at this point before we see another order? Yeah, I would think 2022 is clearly the safe bet. If there's upside, might be some opportunity later this year. It's all going to be dependent on how the existing inventory gets released as the policy landscape changes and we move from waiting to execution. Thanks. On the 3x3 cost reduction program, if you've already achieved your full year 2021 target, does that shift the prior timeline for, I believe it was 70% reduction in stack cost by 2024? Is it fair to say you could now hit that by 2023? I think that's a fair assumption. We'll have to look at that carefully. It's not just the work that's done in 2021. Some of it'll be time based in 2022 as well. There are three different phases or packages of work we're doing with different time horizons. The package of work for 2021, that cost reduction we're, as I mentioned, certainly tracking ahead against. There's more work to do in 2022 in order to wring out that full 70%. Where we're sitting today, I expect us to achieve a number higher than the 70% cost reduction and likely will be able to pull that time in, but it might only be a quarter or something like that. Okay. On rail, Randy, I appreciate your efforts working directly with the rail operators. Is Ballard also engaging in any activities with the rail OEMs, the Caterpillar and Wabtec of the world? Yeah. There are three or four key rail OEMs and I would say until recently, they've been fairly quiet on this file. That's changed significantly over the last few months, and some of these announcements have really caught their attention. There are activities underway right now, and I think there'll be more developments on that front in the next 12 to 24 months. If I may ask one more question. On the heavy-duty truck market. When I look at the TAM that Ballard has identified, I think roughly three-quarters of that is medium and heavy-duty trucks globally, so it's pretty significant. Battery electric trucks are an emerging competitive alternative. For example, there was an academic study recently that argued that payload is not impacted by the battery as much as we previously thought. Randy, I believe you have a view on this issue. Have there been any real technology developments recently that have changed the window of opportunity for fuel cell trucks in the long-haul market, or does that continue to look like a great opportunity? Yeah, I think it is a fantastic opportunity. I don't see today or in the near future at all, any changes in battery technology that will help it expand its addressable market from light duty into really heavy-duty applications. I think this is a market that is very clearly going to be fuel cells. Okay. Really look forward to the prototype. Thanks for taking my questions. Thank you, Jonathan. The next question comes from MacMurray Whale with Cormark Securities. Please go ahead. Hi, Randy. I'm just wondering if you've shipped a lot of equipment, a lot of work in progress or components to China in advance of the rollout. Is there a risk behind this? You've been continuing to change the module technology and work on various initiatives. Is there a risk that that work in progress needs to be replaced before it actually gets shipped in modules? Is there a worry at all that there's a write-off coming associated with that? That's certainly not in our plans. If you look at the activity levels we have at the Weichai- Ballard joint venture with the customer base, we are seeing the engagement around the existing product we have. There haven't been discussions with the end customers about looking at next generation. That's always a theoretical risk, I suppose, Mac. Okay. In terms of the launch, when you get the announcements, when they're made public, do you foresee an actual sort of ramp-up? Presumably there's not a ramp-up, but a step-up in demand or at least in shipments, because presumably there's some pent-up demand because you continue to do the work with the customers. Presumably, you should be able to ship a lot more product versus the original plan, which I would imagine was a smoother ramp. Can you speak to the dynamics of how you can sort of hit the ground running when it is turned on? Yeah. I think this is a coil that's spring-loaded and ready to unravel. I do think, though, we'll have to wait and see what the final policy arrangements are and what kind of behavior that incents. Our expectation is a kind of first-to-post type of approach, where higher points will be awarded for projects first in the field. If that's the case, that would certainly see a lot of pressure on customers to getting products out as soon as possible. We'll have to see how the policies end up being shaped and what behavior that implies. Okay. My last question is just a clarification. The technology that would go into the Linamar initiative, that is directly related to the work you did with Audi, I would imagine. Is that fair? Yeah, there's a lot of learnings, obviously, on a high power density, high performance stack for that market application. Of course, we have rights to that stack, including for the passenger car market. Yeah, that would be a safe assumption. Okay, great. Thanks, Randy. Thanks, Mac. This concludes the question and answer session. I would like to turn the conference back over to Randy MacEwen, the CEO, for any closing remarks. Great. Thank you for joining us today. Paul and I look forward to speaking with you in August when we discuss results for Q2 2021. Thanks again. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.